FOR all the talk about weak sentiment and absent foreign flows, the valuation gap among companies listed on Bursa Malaysia is often framed as a market problem. It is not.
A closer look suggests that the gap is neither broad-based nor indiscriminate.
Within most sectors, valuations vary sharply between companies operating in similar conditions.
Market leaders continue to command healthy multiples, while a sizeable group of companies, often profitable and well-capitalised, trade persistently below the book value and below regional peers.
This divergence points to a more specific reality. The discount is concentrated, company-level and in many cases linked to decisions within management control.
That distinction matters, because it changes who is accountable.
If the issues were primarily driven by market sentiment, the remedy would be patience and better investor relations.
But experience across markets suggests that sentiment tends to follow performance signals, particularly around how companies deploy and manage capital.
With the Tokyo Stock Exchange pushing for value creation, companies that saw meaningful re-rating were those that backed up intent with action, including strengthening shareholder returns, streamlining non-core assets and deploying capital more deliberately.
South Korea’s Value-Up initiative has similarly shown that sustained valuation uplift tends to track capital action, not narrative alone. The takeaway for a Malaysian board is straightforward. Markets respond most clearly to capital decisions.
This is where Malaysia’s MY Value Up programme becomes relevant in a different way. While it is often associated with improving investor visibility, its broader impact may lie in how it raises expectations around value creation at the company level.
In practical terms, 2026 is a diagnostic window – a year in which boards can assess, candidly and in private, where and why they trade at a discount.
As transparency and benchmarking increase over time, the ability to articulate and demonstrate clear value creation is likely to come under greater scrutiny.
At that point, standing still ceases to be a neutral act. Doing nothing becomes a visible and measurable choice.
For boards, narrowing valuation gaps is fundamentally a capital strategy exercise.
Three areas stand out. First, rank every business against its cost of equity rather than its history or its budget; capital that cannot clear the hurdle should be returned or redeployed, not quietly retained.
Second, capital return needs to be more deliberate. Many Malaysian companies maintain strong balance sheets, but excess capital that remains idle can weigh on returns and signal a lack of clear deployment priorities.
A more structured approach to dividends, complemented by considered use of share buybacks and cancellations, can help reinforce discipline.
Third, simplify: separate or carve out the sub-scale and cross-held assets that dilute group returns and manufacture the conglomerate discount. Disclosure matters – but it comes last, once there is something real to disclose.
These are not quick fixes and execution matters. But they are largely within the influence of boards and management teams. The prize is not trivial.
EY-Parthenon analysis suggests that if Malaysia’s discounted companies closed the gap to their own sector peers, the latent value would run on the order of RM0.4 trillion. This is illustrative rather than a forecast, and realisable only through capital deployment, but large enough to warrant a board’s attention.
Encouragingly, a first wave of Malaysian boards is already moving and they share a recognisable signature: explicit return-on-equity-versus-cost-of-equity discipline, active capital return and a readiness to simplify the portfolio.
Over time, these examples are likely to shape broader market expectations.
Malaysia’s valuation gap has long been attributed to external factors. While those factors play a role, they are only part of the story. A meaningful share of the outcome sits within how companies allocate capital, structure their portfolios and prioritise returns.
For boards willing to take a structured and forward-looking approach, this presents a tangible opportunity to strengthen their positioning for the next chapter of growth.
Rafiq Saiful Aznir is EY-Parthenon Senior Executive Director, Strategy and Transactions, Ernst & Young PLT. The views reflected above are the views of the author and do not necessarily reflect the views of the global EY organisation or its member firms.
